Pay everyone $400 per week (current age pension), rich or poor, indexed to the CPI. Governments print the money (they do now), and the money goes around. You have an economy. Employers pay a margin above the UBI to attract workers if they want them (overall probably cheaper for them than now). A true market then controls most working conditions, not the current blackmail. Centrelink (now a failed organization) not needed. Tax system simplified. Automation taking jobs doesn’t matter. Health costs fall. People can choose to learn, grow and think. Free university & tech (like Germany). Employment for satisfaction, more money and/or career interest.

Thor MayAdelaide,
2016

This page is an initial
starter list for discussing the "Universal Basic Income " topic. The page makes no special claim to quality, and additions are
welcome.

The idea of a universal basic income is as old as the formal study of economics: centuries. It has been tentatively and partially experimented with in several countries, from the rich (e.g. Canada, prospectively Finland and Switzerland) to the very poor (e.g. most of Brazil, and now Kenya). U.S. President Richard Nixon, about as far from a bleeding heart type as you might imagine, approved legislation for something very like a UBI before it was killed, in typical reactionary style, by the United States senate. A search of the internet will turn up projects and foundations devoted to promoting a UBI, and acting as clearing houses for research papers on the subject (e.g. BIEN, the Basic Income Earth Network). Most of these online foundations revolve around ideas of social justice.

2. Why hasn’t a UBI ever become firmly established?

a) There is a common philosophical and observational viewpoint that human beings are fundamentally stupid, lazy, dishonest, opportunistic and inclined to badness, so they must be kept in line with a toolbox of sanctions, including the threat of poverty. This line of argument broadly informs most of the conservative side of politics. In such a context, a UBI has to be seen as an invitation to sloth amongst the working classes, who will no longer be willing servants of commerce and industry, not to mention being less inclined to respect their betters.

b) The actual consequences of implementing a country-wide Universal Basic Income are unknown, and there are sure to be some unintended consequences, not necessarily all bad. A small number of pilot schemes implemented over the last century seem to indicate improved public health and education outcomes, sometimes an increase in workplace participation, and only a small number of individuals withdrawing from the formal workplace. However, neither the general run of political leadership, nor the public at large, are given to bold, imaginative leaps, so the most likely trigger for a UBI, if it is to happen, seems to be somewhat desperate experimentation when all else fails. This scenario is actually increasingly possible as the implicit contract between labour and capital breaks down. That is, through automation, the production of goods and services will require only minimal human supervision. Where workers are not needed, consumers with spending power will also disappear, threatening the demand side of industry. A UBI would be at least a partial solution to that.

c) From the earliest times a parade of macro economists, including Nobel Prize laureates as different as Milton Friedman and Joseph Stiglitz, have argued for some kind of UBI. On the whole, these professionals were not thinking in humanitarian terms. Their arguments have been quite pragmatic. What they had in common was a recognition that an economy without circulating money becomes anaemic and dies. They might have disagreed about how to keep that money circulating, but they all recognized that at the lower end of the income spectrum, it was counter productive to let large numbers of people fall into poverty. Without money people could not consume and the economic machine would falter. The demonstration of this kind of failure is everywhere to be seen in 3rd World economies. Less desperately, it can seen (for example) in the consequences of current weakening demand in European economies (Stiglitz 2016).

However it remains the case that the overwhelming majority of the public, of journalists, and even of professionals in various financial fields, have very simple, primitive ideas about the nature of money and economic behaviour (they prefer metaphors built around a household budget, which is an entirely different critter). This is consistent with human activities in all other areas of behaviour. From unskilled labour to highly trained professionals like doctors, people learn a set of procedures to cope with the daily demands that are made upon them. So long as they are able to keep their jobs, pay their bills and raise a family, very very few of them will ever seriously question the nature of the procedures and rituals they follow. For these reasons, resetting the “economic system” as they understand it by inserting something like a UBI will not happen except under extreme pressure. Further, they will raise endless “practical” objections expressed in terms of their simple understanding of economics, no matter how misguided that framework may be.

3. So what is an economy anyway?

There is an old joke that if you put two economists in a room they will come out with three different opinions. That is sure to be the case if you ask them what an economy is. Liberated from being such an expert, let me express a few (no doubt misguided) ideas about my own understanding of some economic processes.

Firstly, amongst any collection of human beings, whatever system each has for spending his or her daily 24 hours, it interfaces only incidentally and somewhat unpredictably with all the other people in that population. This kind of unpredictability has something in common with the stochastic process that physicists call Brownian motion, and its non-deterministic character extends at more complex levels through all of the systems which we vaguely describe as “economics”. (That is, no given economic process can be quite predictable, and any guru who says otherwise is lying). Anyway, back at the basic personal level, each time an interpersonal encounter occurs, there is some kind of exchange. It might merely be an exchange of awareness or words, but to the parties involved that is a kind of currency and has positive or negative value. Without any currency of exchange, each being is an isolate without value.

Some human exchanges involve the mediation of money, a promissory note which the community has tacitly agreed has a certain transferable value. Transferrable value, the ability to displace an exchange across time, store it for future benefit, and assign it to different beneficiaries, creates a chain of relationships which the discipline of economics attempts to describe, but can only capture in the crudest detail. Part of the problem is that the value of the promissory note called money is different for each party which calls upon it. If I get a $400 per week pension, and another man is paid $4000 a week, then $1 is worth more to me (its marginal value is greater) than to the other guy.

That is only the beginning of the headache. A government can authorize notes and coins called legal tender (the folding stuff in your wallet), but promissory notes of future exchange can be created in countless other ways. Anyone who extends credit does just that, including of course credit cards, and the trillions worth of magical stuff by many names which float through the computers of merchant bankers. The truth is that nobody can properly keep track of all this, not least because huge parts of it are shuffled across national borders with fraudulent values declared by corporations. The exchange value of money survives only as long as there is overall public confidence in it. This confidence fluctuates, and can evaporate altogether, so there is an incessant propaganda barrage (financial statistics) to offer reassurance about that value. Ponzi schemes within Ponzi schemes. This confidence usually only comes completely unstuck under extreme conditions, such as military invasion.

Confidence in the value of money at street shopping level survives partly because most people cannot, or prefer not to, understand and question the explanations above too closely. For them, the economy is indeed described by that small set of exchanges which is their household budget. As far as they are concerned, the government is working with a similar budget of a fixed amount, which cannot be added to or subtracted from arbitrarily, and the overall country’s economy is the sum of all their small budgets, so cannot be added to or subtracted from arbitrarily either. When these propositions are put to them in an election they will vote accordingly.

4. A foreign tale of parallel universes

To live in a so-called developing country like China is to realize starkly that the Chinese economy, for example, is not one economy but a tapestry of parallel and intertwining economies. The farmers who park their tractor-trailers of cabbages and carrots to sell to housewives in city backstreets have nothing in common, economically or socially, with the official nosing past in a black Mercedes. The same dress which sells for 100 yuan in a mass clothing market, will be tagged for 1000 yuan in an upmarket boutique, and the official’s wife will be sure to boast of the high price she paid; (yes, I have seen this exact example in play). Value, in other words, is in the eye of the beholder and her social circle. If the government were to declare that all 100 yuan dresses were to be henceforth sold for 1000 yuan, the official’s wife would be furious at losing her social status and the farmer’s wives would riot in despair.

One moral from the dress parable is that people will always compete for status, which usually means competing for income. They will always compete for a higher income and the employment which supports that. The second moral, an inverse of the first, is that when people are denied the wherewithal to maintain basic dignity, as with the farmer’s wives, or to eat, as with the housewives buying carrots and cabbages in the street, then the stage is set for uprising and revolution.

Well aware of the second risk, the Chinese government frequently interferes in every kind of market to indirectly ensure an effect which is comparable in some ways to a universal basic income. By the simple arithmetic of traditional accounting, Chinese banks (among the biggest in the world), should have been insolvent many times over. It doesn’t happen. The Communist Party orders the government to print more money, which is given to the banks under instructions to distribute it according to political need (usually to uneconomic state owned enterprises, which however employ large numbers of people). The inflation risk is exported abroad in exchange for $US; (and not only as plastic buckets. China is currently selling cold rolled steel abroad at a price below domestic production costs – a direct violation of WTO rules).

Well, at least China’s overlords don’t have to worry about elections. Elections are (foolishly) won or lost in Australia as the population is fed scare stories about national budget deficits putting us into dire imaginary “debt”. (It is credit cards and mortgage interest which put us into household debt – a different story). Look how the Chinese have not cared about that:

And is Australia really so different on this issue? Compare historical fiscal deficits in Australia (Mitchell 2016):

In other words, in terms of the fiscal cycle (expenditure by governments as opposed to the public), with a fiat currency (issued at will with a value set and guaranteed by the government to banks and citizens) fiscal deficits over time don’t matter a damn if public confidence is managed skilfully. This is important to the discussion of a Universal Basic Income because an early and perhaps politically fatal objection is going to be “the country can’t afford it”. Yes the country can afford it once everyone has gotten their heads around a new variable – UBI – in the economic equation. We don’t need to call that variable an expense. Quite apart from disposing of the huge compliance costs built into current welfare systems worldwide, a UBI may very well generate wealth by redirecting part of the monetary cycle from, say, offshore tax havens into a demand for goods and services.

5. Dimensions of economic ideology

Once in the 1970s I was asked to teach economics in a New Zealand junior high school. The text book was a kind of fairy tale called “Life on Paradise Island”, where the inhabitants hit upon the idea of barter, then labour specialization, then money. Since 75% of my students were Polynesian, they probably remembered the quaint Island characters better than the idealized economic cycle in the story. If so they would be less deceived than members of the general public who may never grasp that every market is gamed, camouflaged and trick-baited like a roulette wheel. Remarkably, the son of the author of “Living on Paradise Island”, James Warmke, has created a website called “Deconstructing Paradise Island” (https://sites.google.com/site/deconstructingparadiseisland/ ) where he sometimes acerbically takes apart idealized economic myths. He is especially biting about the real nature of fiat money.

Back to earth, circa 2016, life on our paradise island is becoming a bit complicated (May 2013b). We have come out the far side of an age of ideologies, notably communism and capitalism, and some ever-changing soup called socialism as the ocean in between (May 2014e). The horizon is hazy, with a faint air of menace. That 19th Century version of popularized Marxism, sold as promoting the communist brotherhood of man, where each contributed according to his ability and was rewarded according to his needs, turned out to be the confidence trick of its era. It’s promoters were ruthless opportunists (as ideologues usually are) while the “masses” (a.k.a. the sheeple), multiply betrayed, could only find solace in cynicism and corruption.

Meanwhile, capitalism has mutated, bifurcated and generally got its DNA mixed up with all kinds of low-life ambitions (May 2014b), a good many of them misanthropic. The most pathogenic versions of capitalism could nowadays be better collected under the label of corporatism (May 2008, 2011, 2013a, 2013b, 2013c, 2014a, 2015, 2016). Humans were tribal, then homogenized into nation states, and are now creamed off into corporations. Corporate man is a denatured creature, shorn of loyalty to anything but the legal fiction of a company, which itself is nourished purely on money, anyone’s money, taken antiseptically with no greater purpose in mind.

Corporations themselves, are supposedly cooperative undertakings to assemble capital and skills for productive enterprise. However, although born in national jurisdictions, corporations are in fact also virtual worlds which over time are apt to dissociate their fictional selves from any national or tribal loyalty, let alone loyalty to individuals. Their agents comply with laws, employ human and material resources, pay taxes, and make appeal to local sentiments through advertising only to the extent that these factors contribute to shareholder profit and (often with highest priority) the income status of their managerial elites. Their share of contribution to national budgets has plummeted since the 1950s, and large numbers of them pay minimal or no tax at all. Corporate funds forgone from benefitting national economic systems frequently wind up warehoused in offshore tax havens, and by some estimates (e.g. British Parliamentary Tax Justice Association) may amount up to US$31 trillion. Australia’s GDP (2013) was about US$1.56 trillion. In other words, funds which could finance a Universal Basic Income to pretty well the whole planet’s population are stolen and rendered useless to satisfy, in the end, the hoarding lust of a handful of corrupted individuals.

Meanwhile, politicians, elected or otherwise, market themselves as representing the interests of national electorates. Well, life is complicated, and some of them some of the time might console their consciences by helping some small group of electors here and there. However, the international evidence from many studies is now overwhelming that politicians everywhere (regardless of ideology) by and large are kept in office by particular powerful lobby groups whom you might call the 5 star hotel mafia. Here then is another potentially fatal barrier to a Universal Basic Income in any country. On the other hand, if the 5 star hotel mafia become persuaded that their own interests could be best served by efficiently keeping the natives quiet, then they might become prime movers for a UBI (marketed of course as lovingkindness for the greater good). In the good old days of the Roman Empire, the elites called this “bread and circuses” to pacify the mob. Could it be that the exotic fascism of the Trump phenomenon will scare elites into a new social contract?

While the 5 star hotel mafia make and break governments, back on the mean streets where things are actually made and sold, where people trudge off to work, it turns out the largest amount of real economic activity involving the bulk of workers does not take place in the glass skyscrapers of Fortune 500 companies. In fact, 2 million Australians claim to run their own businesses (May 2015). What a “business” amounts to is a many splendored thing, and a very large number of these people are glorified employees put at risk by larger employers who think hiring a so-called contractor is obligation-free.

Let us draw some figures from the Independent Contractors Australia website (ICA 2013) where they also offer a useful (2010) breakdown of the overall employment implications for the country. "When all self-employed people are combined with the employees who work in their businesses, up to 75 per cent of the total workforce (88 per cent of private sector) work in small and medium businesses. The following table shows how the figures are constructed."

Therefore, if we talk about the economics and pragmatic possibilities of introducing a UBI to Australia, this very significant sector of the population need to be educated and persuaded that such a UBI is both feasible and in their interests. Most of these people live on the margin of economic security, include a larger than average number of risk takers, and will tend to regard with distaste anything that smells of welfare for those they consider undeserving. On the other hand, they are very open to any change which promises to reduce burdens of bureaucratic compliance (often the bane of their lives). A UBI for them personally is unlikely to discourage their attempts at enterprise since they are natural go-getters, but may well provide an economic floor upon which they can risk new, wealth building enterprises.

6. Disincentive and waste in the current paradigm

If you are invited to a board game or a card game, but are given no chips or no cards to play with then your evening is likely to be wasted. This is analogous in some ways to the situation of welfare recipients who are accused to being parasites but offered no way into the game. The core argument in this essay is that a Universal Basic Income has the virtue of making everyone a player, and keeping them as players, even if they are not particularly good players. The idea is that it is better and ultimately cheaper to keep everyone in the game, rather than having a bunch of despised rejects wandering around breaking up the furniture and stealing the liquor.

That sounds logical, but there is always the argument that we don’t have the cash resources to keep everyone in the game with a handout. However, the reality is that we already do this, more or less, with much bad grace, enormous administrative waste, and actively discourage many players from developing better options. Here are some actual facts and statistics from the Australian situation:

Firstly, who actually depends on government handouts of some kind? The Australian government itself expresses this as a dependency ratio:

Dependency ratios are expressed as a percentage—a higher number suggests less support available, and a number more than 100 implies there are more dependants than supporting people. Dependency ratios do not account for the proportion of people not in the labour force for reasons such as study, disability or caring responsibilities. They also do not take account of the financial independence of people aged over 65, nor do they reflect cost differences in caring for children and older people.

Australia's total dependency ratio has generally fallen over the past 5 decades, from 59% in 1972 to 48% in 2008 and 2009, implying more people being available to provide support per dependant than in the past. However, in recent years the rate has started to slowly rise again and by 2014 had reached 51%. Given current population projections, it is likely that a stabilisation in the child dependency ratio coupled with a rise in the old-age dependency ratio will lead to the total dependency ratio returning to around 60% by 2046 and continuing to rise over the ensuing decades (see Figure 5.1.1) (ABS 2008). [Australian Government (2015) "Working Age - 25 to 64"]

Dependency ratios, 1972 to 2100

Sources: ABS 2008, 2013c, 2014a.

So, maybe we don’t have a “welfare crisis” after all, as we are panicked into believing before each national budget. In fact, the dependency ratio has been falling until recently, and will only rise again slowly. The Australian federal parliament, out of the glare of media political spin, knows very well that Australian welfare funding is not in crisis. We have this from Don Arthur (21 December 2015) "What counts as welfare?". Parliamentary Research Papers 2015-16. Parliament of Australia, Social Policy Section:

according to the Australian National University’s Peter Whiteford, Australia .... does not have a welfare crisis. The proportion of GDP spent on social security cash payments peaked at around 9% of GDP in 1996. It also attained this level in 2000 when compensation for the GST was provided. According to the most recent OECD figures, it was around 8.7% of GDP in 2013.

Similarly, as the McClure review interim report pointed out, the percentage of the working-age population receiving income support peaked in 1997 at 24.9%, before falling to 16.6% in the 2008, rising to 17.6% in 2010 following the global financial crisis and then easing back to 16.7% in 2013.[28]

Because the social security and welfare category is so large and diverse, it is important to drill down into the data before drawing conclusions about any particular element of the category”

From the same source (Arthur 2015) we learn that

According to the 2015–16 budget papers, the Australian Government will spend an estimated $154.0 billion on social security and welfare in the 2015–16 financial year.[5] This represents 35.4 per cent of total government spending.[6]

Social security and welfare includes both payments (social security and compensation and services to groups, such as veterans, the aged, children and families, the unemployed and people with disability.

So how does this compare with roughly similar economies?

The largest slice of our welfare payments goes towards the age pension. According to OECD Pensions at a Glance 2013, Australia’s public spending on the age pension is much lower than pension spending in Europe…Australia spends 3.5% of GDP on the age pension, while Italy spends 15%, France spends 14% and the United Kingdom spends 6% [Stevens 2014]

From the News Ltd press (Sydney Daily Telegraph) we are offered a rather more alarmist account of Australia’s welfare expenditure:

The government has approved 14.6 million applications to welfare, making up some 240 million welfare payments. That figure includes Disaster Relief Payment and the Farm Household Allowance. … There are now 824,470 people claiming the Disability Support Pension and 727,778 claiming the Newstart Allowance …. There are 2.4 million claiming the aged pension and 3.9 million with a pension concession card. [Meers 2015]

Since Australia has 24 million people, what can be discerned from the Telegraph account is that there can’t be many families in Australia which are not involved in some way with the annual 240 million welfare payments. Anyone who has had the misfortune to tangle with Centrelink (Australia’s federal welfare agency) knows that it is a failing organization with low morale and perpetual inconsistency, understaffed, with broken computer systems, and a phone system which by recent reports simply cuts off 60,000 phone calls a day. The waste and replication stemming from this administrative failure is staggering, and accumulating by the day. It routinely antagonizes and disadvantages huge numbers of people.

7. Getting from here to there

Australia is not known for brave new initiatives. Bravado, yes, but the implementation of untried ideas usually comes down to a timid imitation of something already working in another country. Since at least World War II, that other country to be imitated has been the United States of America. America does some things well, at an elite level. It has probably the best elite universities, and at the upper end of the range has demonstrated some outstanding technological innovation (not least, in communications). When it comes to ordinary schooling, public health, public infrastructure, and public administration, the daily administration of law, not to mention politics … its record is appalling. In all of these things America is amongst the worst of possible models for Australia to imitate (e.g. see Tanner 2016).

Well, we could wait for the Scandinavians to get some kind of UBI up and running. They have population sizes far more equivalent to the Australian situation than America. Australia however has rarely imported ideas from northern Europe. Hey, they don’t speak English, do they? (actually they do, often with alarming competence). The United Kingdom was of course white Australia’s cultural origin, and yes, we still do take in the odd idea from there. Politically, nowadays Britain is a rather disunited Kingdom, and short of a political makeover is unlikely to be our pilot project for a UBI.

Self help: If Australia did begin to plan for a UBI, what kind of roadmap could start the political promises rolling?You can’t just put an extra weekly $400 in everybody’s bank account overnight. Given the economic paradigm we are playing in at the moment, the budget deficit would fall off a cliff (so what?), but more seriously inflation would go through the roof as every commercial opportunist from landlords to supermarkets raced to soak up the extra cash.

No, there has to be a transition which doesn’t hugely inflate the existing money supply, yet slashes compliance costs, and won’t excite fatal political opposition. We need something which can be sold as win-win for all the players.

Here is a starting proposition to play with:

a) Establish a Citizens’ Federal Savings Authority. This would have to have independent statutory status so that it couldn’t be vandalised by the next lunatic populist leader. Ideally, it would have constitutional independence.

b) A national savings account would be assigned to every Australian over 18, with $400 per week contributed by the government or an employer to the Citizens’ Federal Savings Authority.

c) For employers, the $400 would be a flat deduction from wages, pro rata for part-time workers or the self employed, and topped up by the government if less than $400. Employer contributions to be subtracted from take-home pay. Something similar already occurs with compulsory superannuation. The objective would be to minimize compliance costs.

d) A personal debit card would be issued to all citizens by the Citizens’ Federal Savings Authority, and a standard bank rate of interest paid on whatever individuals leave unspent. The account would not offer a credit facility and could not be offered as security against debts elsewhere.

Operating the kind of facility just outlined is perfectly feasible. It would require quite a large shift in thinking by both the public and the commentariat. Once it was functional there would be many opportunities and consequences to explore at every level. From the perspective of macro economics the national economic cycle would have a floor put under it for all participants. This is important. A vehicle engine is set to idle at a certain minimum number of revs. Below that the engine stalls. The economic engine has stalled, or come close to stalling, too often. It doesn’t have to be that way.

Professional bio: Thor May has a core professional interest in cognitive linguistics, at which he has rarely succeeded in making a living. He has also, perhaps fatally in a career sense, cultivated an interest in how things work – people, brains, systems, countries, machines, whatever… In the world of daily employment he has mostly taught English as a foreign language, a stimulating activity though rarely regarded as a profession by the world at large. His PhD dissertation, Language Tangle, dealt with language teaching productivity. Thor has been teaching English to non-native speakers, training teachers and lecturing linguistics, since 1976. This work has taken him to seven countries in Oceania and East Asia, mostly with tertiary students, but with a couple of detours to teach secondary students and young children. He has trained teachers in Australia, Fiji and South Korea. In an earlier life, prior to becoming a teacher, he had a decade of finding his way out of working class origins, through unskilled jobs in Australia, New Zealand and finally England (after backpacking across Asia to England in 1972).